What taxes are there in Andorra?
At Agisa, as experts in investment advice and management, we understand the importance of having accurate and up-to-date information on taxes in different jurisdictions. In this article, we will focus on taxes in Andorra, both for companies and individuals.
Andorra with a very advantageous tax system
As is well known, Andorra is characterised by its favourable tax system, which offers a series of advantages for those who decide to settle or invest in the country. Over the years, the country has implemented a series of reforms and measures to attract foreign investment and promote economic development, which can be seen in its own taxes.Corporate Taxation
Corporate Tax
One of Andorra's main advantages for companies is its corporate tax system. In 2012, Andorra introduced a 10% Corporate Tax on corporate profits. This tax rate applies to companies whose profits are mainly related to economic activities within Andorra. It is important to note that Andorra also offers a number of tax incentives for certain sectors, such as research and development or information technology, which may include tax exemptions, deductions or tax reductions.General Indirect Tax (IGI)
The main tax for businesses is the General Indirect Tax (IGI), which is arguably the equivalent of VAT in other countries. As an indirect tax, it is levied on the sale of goods and services rather than directly on the income or profits of individuals. Most transactions and services carried out in Andorra are taxed at a general rate of 4.5%. However, there are sectors such as finance and construction where the IGI rate rises to 9.5%. There is also a reduced rate of 2.5% in Andorra for some essential services, such as education and medical care, and some other activities may even have a rate of 1% or be exempt from this tax.Taxes payable by individuals in Andorra
Personal income tax (IRPF)
With regard to taxation of individuals, Andorra has a Personal Income Tax (IRPF) which applies to residents of the country. Personal income tax rates vary according to the income and personal situation of each person. It is divided into several scales ranging from 5% to 10%.Non-Resident Income Tax (IRNR)
In case you are not resident in Andorra, but you obtain income from the territory, there is the IRNR tax. This applies to different types of income, such as income derived from economic activities, leases, interest, dividends, capital gains, among others. It also applies mainly to frontier workers from Spain or France who work in Andorra on a daily basis. The general rate of IRNR in Andorra is 10%.Inheritance and gift tax
Inheritance and donations in Andorra are tax free. This is a great advantage and can be an incentive for lifetime donations and avoid the fragmentation of family estates, with all the disadvantages that this entails. Each situation must be analysed individually, but as we can see it can be a great advantage if the deceased, donor and/or donee are resident in the Principality of Andorra.Communal Taxes and Fees
In Andorra, there are also Communal Taxes and Levies, which are taxes applied at a local level in each of the seven parishes of the country. On the one hand, Communal Taxes are levied on different situations, such as vehicles or commercial and professional activities, among others. While Communal Taxes are charges levied for specific services provided by the communal administration, such as waste collection, water supply, public cleaning or occupation of public space. These are usually less than ¤1,000 per year in total for a medium-sized company in Andorra, and less than ¤200 per year for an individual.Tax benefits and incentives
As mentioned above, there are several advantages offered by the Andorran country that should be taken into account, among which the following should also be highlighted:- Lower social security contributions: In Andorra, social contributions are lower compared to other countries. This represents a significant saving for workers and allows them to have a greater spending capacity.
- Double taxation agreements: There are agreements with several countries that prevent companies from being taxed twice on the same income. These agreements seek to encourage investment and trade between the countries involved by removing tax barriers and promoting economic cooperation.
- Inheritance and gift tax exemption: Individuals can inherit or receive gifts freely and without additional taxes, which facilitates the transfer of wealth and business continuity in many cases.
Frequently asked questions (FAQs)
1. What are the requirements for setting up a company in Andorra?
In order to establish a company in Andorra, it is necessary to meet certain requirements, such as having a minimum capital, presenting a descriptive report of the business activity, having commercial premises, among others. It is also necessary to have the corresponding permits and licences, depending on the type of business.2. What are the conditions to benefit from tax incentives in Andorra?
The conditions to benefit from tax incentives in Andorra may vary depending on the sector and type of activity. Generally, certain criteria related to investment, employment generation or innovation in the sector must be met.3. Are there any limitations on the type of economic activity that can be carried out in Andorra?
Andorra has a wide range of permitted economic activities, covering sectors such as tourism, industry, financial services, technology, among others. However, there are certain restrictions for some sensitive sectors, such as banking, which requires a special permit and stricter regulatory supervision.In short, Andorra offers an attractive tax system for both companies and individuals thanks to its concern for those seeking to optimise their investments and thus foster the country's economic development. In this way, both companies and workers can take advantage of the benefits and tax incentives offered by the Principality, such as low taxation, tax exemption and special regimes, obtaining, in short, a fair and proportional tax burden.
If you are considering setting up a business or moving to Andorra, it is essential to have good tax and legal advice to make the most of the tax advantages in the country. At Agisa, we are here to offer our expertise and support in tax management and financial advice. Contact us today and find out how we can help you optimise your tax burden in Andorra.